Outback, Ltd., manufactures tactical LED flashlights in
Melbourne, Australia. The firm uses an absorption-costing system
for internal reporting purposes; however, the company is
considering using variable costing. Data regarding planned and
actual operations for 20x4 follow:

Budgeted Costs

Per Unit

Total

Actual Costs

Direct material

$

12.20

$

1,610,400

$

1,464,000

Direct labor

9.80

1,293,600

1,176,000

Variable
manufacturing overhead

4.40

580,800

528,000

Fixed manufacturing
overhead

4.20

554,400

566,400

Variable selling
expenses

7.50

990,000

840,000

Fixed selling
expenses

7.70

1,016,400

1,016,400

Variable
administrative expenses

2.70

356,400

302,400

Fixed administrative
expenses

2.70

356,400

364,400

Total

$

51.20

$

6,758,400

$

6,257,600

Planned Activity

Actual Activity

Sales in units

132,000

112,000

Production in
units

132,000

120,000

Beginning
finished-goods inventory in units

37,000

37,000

The budgeted per-unit cost figures
were based on the company producing and selling 132,000 units in
20x4. Outback uses a predetermined overhead rate for applying
manufacturing overhead to its product. A total manufacturing
overhead rate of $8.60 per unit was employed for absorption costing
purposes in 20x4. Any overapplied or underapplied manufacturing
overhead is closed to the Cost of Goods Sold account at the end of
the year. The 20x4 beginning finished-goods inventory for
absorption costing purposes was valued at the 20x3 budgeted unit
manufacturing cost, which was the same as the 20x4 budgeted unit
manufacturing cost. There are no work-in-process inventories at
either the beginning or the end of the year. The planned and actual
unit selling price for 20x4 was $70.60 per unit.

Required:

Was Outback’s 20x4 operating
income higher under absorption costing or variable costing?

Related Questions in Accounting Standard Codifications

for absorption costing purposes was valued at the 20 x 3 budgeted unit manufacturing cost , which was the same as the 20 x 4 budgeted unit manufacturing cost . There are no work-in-process inventories at either the beginning or the end of the year . The planned and actual unit selling price for 20 x...

manufacturing overhead 8.00 Budgeted fixed overhead in 20 x 4 was $194,300 and budgeted production was 29,000 sleeping bags. The year’s actual production was 29,000 units , of which 26,800 were sold . Variable selling and administrative costs were $ 1 .70 per unit

Cincinnati Cycle Company produces two subassemblies, JY-63 and RX-67, used in manufacturing motorcycles. The company is currently using an absorption costing system that applies overhead based on direct-labor hours. The budget for the current year ending December 31, 20 x 4

I have to prepare a Tax form 1065 and 2 Schedule K's.I already prepared the Tax form and 1 schedule K.My question is can I submit to you all the instruction along with what I have done so far so that you can revise my work and ONLY prepare the 2
Posted
yesterday

I would like if possible forPATRICK AREKAI AMAYA(Tutor) to work on the following.Anna owns a 60% interest in a generalpartnership—TheAeroPartnership—which she sells to the 2 remainingpartners—Janet and Ashley. The 3 partners have agreed that Anna wi
Posted
4 days ago

A local council owns an underground railway system and the railway’s managers have to make a decision on whether to lower fares in an attempt to increase passenger numbers. If they decide to reduce fares they will then have to decide whether to laun
Posted
9 days ago